Apple Accuses DOJ of Siding with Amazon Ebook Monopoly

By Bryan Chaffin

May 23rd, 2012 7:22 PM EDT

Apple is accusing the U.S. Department of Justice’s antitrust suit against it and five of the so-called “Big 6” U.S. publishers is “fundamentally flawed as a matter of fact and law.” In court documents, Apple argued that the DOJ has sided with Amazon’s Ebook monopoly, rather than competition.

The DOJ has accused Apple and the five publishers of conspiring to raise prices for Ebooks in 2009 in advance of the launch of Apple’s iBooksstore and iPad in 2010. Three of those publishers have settled with the DOJ (Hachette, Simon & Schuster, and HarperCollins), while Apple, Penguin Group and MacMillan are fighting the charges in court.

The government has argued that Apple and the publishers colluded to move the ebook publishing industry to the agency model, where publishers set the price instead of retailers. Those publishers also agreed to be contractually prohibited from selling books cheaper at other retailers (a clause dubbed “most favored nation” or MFN due to similarities in the international trade status of the same name).

The result was that the publishers used these tools to renegotiate with Amazon, preventing Amazon from dumping ebooks (especially best sellers) below cost, and ebook prices rose overnight. Amazon’s share of the ebook market fell from 90 percent to about 60 percent today as Barnes & Noble’s Nook, Apple’s iBooks, and independent ebook sellers were instantaneously “competitive” with Amazon because they were all charging the same price.

The DOJ has looked on this as anticompetitive collusion, but in court documents uncovered by Reuters, Apple argued that, “Apple’s entry into e-book distribution is classic procompetitive conduct [that created competition where none existed].”

“For Apple to be subject to hindsight legal attack for a business strategy well-recognized as perfectly proper sends the wrong message to the market,” the company added. “The government’s complaint against Apple is fundamentally flawed as a matter of fact and law.”

The Verge also noted that Apple’s court filing claimed, “Apple has not ‘conspired’ with anyone, was not aware of any alleged ‘conspiracy’ by others, and never ‘fixed prices.’”

For an added zinger, Apple charged the DOJ with, “[siding] with monopoly, rather than competition.”